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Market Update

European Markets Up 2% on Oil and Commodities Rally

Author: Lucy Stoeva
Last Update: 1:35 PM ET January 22 2016

4:00 PM Frankfurt – European markets rallied on Friday after prices of oil and commodities rebounded and the ECB left door open for additional stimulus steps. Manufacturing activities in the euro zone slowed down to a three-month low. SAP SA lifted its fiscal 2017 revenue but lowered its operating margin outlook.

European markets traded sharply higher on Friday after a spike in oil and commodity prices boosted energy and mining companies, while yesterday’s policy meeting of the European monetary policy makers left the door open for more economic stimulus.

European Central Bank President Mario Draghi said the bank may reconsider its monetary policy in March because of the financial markets distress and the concerns over slowing growth in China.

Oil prices rebounded from the recent 12-year lows and traded above the $30 benchmark on reports that attacks on oil terminals in Libya may hamper supply.

Brent crude oil futures soared 7.7% to $31.49, while West Texas Intermediate crude oil rose 6.8% to $31.54.

Tullow Oil shot up 14.4%, Total SA gained 4.38%, and Royal Dutch Shell rose 5.27%.

Miners also recorded strong gains as iron ore prices surged following the closure of one of the main ports of top producer Vale SA in Brazil on the allegations for environmental breaches.

The SGX AsiaClear iron ore contract rallied 6.9% to $39.91 a ton.

In the euro zone, the Purchasing Managers’ Index reached a three-month low at 52.3 and the services PMI is at a 12-month low at 53.6, according to Markit.

A reading above 50 indicates expansion and below shows a contraction in growth.

In London, FTSE 100 index gained 126.22, or 2.19%, to 5,900.01 and in Frankfurt, the DAX index rose 190.72, or 2%, to 9,764.88.

In Paris, the CAC 40 index was up 120.29, or 3.1%, to 4,336.69.

Groupe Delhaize SA rose 2.8% to €92.01 after the Belgian supermarket chain reported strong domestic sales.

The company is in the process of being acquired by Ahold later this year, reported quarterly revenue of €6.32 billion.

Same store sales in Belgium increased 5.1% in the fourth quarter and gave Delhaize a market share of 24% in Belgium.

In the U.S., which accounts for the majority of Delhaize revenue, comparable store sales increased 2.3% for the quarter.

Royal Philips NV gained 1% to €22.82 after the electronics maker canceled its plans to sell its lighting unit to a Chinese investor.

SAP SA was unchanged at €71.72 after the German software maker upgraded its 2017 revenue outlook, but projected a decrease in operating margins as demand shifts from high-margin packaged products to subscription-based cloud services.

The revised outlook suggests operating margin of 29.5%, compared to 35% in the past.

SAP’s cloud business grew by 13% in the fourth quarter, well ahead of its rival Oracle Corp’s sales gain of 2%.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc